The United States has the most developed market mechanism and the largest consumer market in the world. Registering a company in the United States and setting up a basic business structure is a key step for domestic companies to develop international markets. Incorporating a U.S. company is arguably the quickest way to make a business a truly international enterprise. Anyone and any company outside the United States can apply to the U.S. government for incorporation, even if they are not a U.S. citizen. In the United States, no registered capital or legal representative is required to incorporate a company. This article will introduce you to the types of U.S. corporations, the incorporation process, and the benefits of incorporating a U.S. corporation.

 

Types of Companies in the United States

Limited Liability Company, LLC

LLC (Limited Liability Company) is flexible in management and can be used for most businesses and is suitable for small to medium sized start-ups, as well as for overseas shareholders. Its features include:

• No restrictions on registration status, foreigners can register
• Tax avoidance as a holding company (Holding Company)

Advantages

• Shareholders have limited liability to the company and their personal assets are not subject to litigation and debts of the company.
• Not subject to double taxation
• Flexible profit sharing, need at least one person to operate and manage

Disadvantages

• Some states, such as California, will charge additional fees for LLCs
• If not a holding company but a direct business, the income may be subject to payroll tax or self-employment tax
• Some industries, such as dentistry, are not allowed to operate through LLC

 

Company Limited by Shares, C Corporation

The most common type of corporation in the U.S. is one that legally separates the assets and income of the owners or shareholders from the corporation, as well as limiting the personal liability of directors, shareholders, officers, and employees. This means that no matter who leaves the company, it will not affect the normal operations of the company. c Corporation can issue additional shares of its own stock to attract investors for the company’s growth, and there is no limit to the number of investors.

Advantages

• Allows companies to raise capital by issuing shares, and is the only type of company that can go public

Disadvantages

• Coporation is subject to both corporate income tax at the corporate level and personal income tax when dividends are distributed to individuals, i.e., double taxation.
• Filing the articles of incorporation and other matters will give the company a certain fee threshold when it first starts to operate
• Coporation is subject to more oversight than other corporate forms

 

S Coporation, a small company with limited liability

The S Corporation structure is similar to the C Coporation, but is limited to U.S. citizens and green card holders. For tax purposes it can avoid the double taxation that occurs in C Coporation. In addition, LLCs and C Coporation itself can become shareholders of another LLC or C Coporation, but not S Coporation.

Advantages

• Small joint-stock LLCs have tax advantages, no or lower corporate and self-employment taxes on the owners, no double taxation, and protection of corporate as well as personal property.

Disadvantages

• An annual registration fee is required
• No more than 100 shareholders
• Must be a U.S. citizen or green card holder, not a Non-Resident Alien

 

Sole Proprietorship, Sole Proprietorship

Sole Proprietorship is available to small entrepreneurs of one person or more and is the most common structure chosen when starting a business: an unincorporated business owned and operated by one person, with the owner entitled to all profits and responsible for all debts, losses and liabilities of the business. Sole proprietorships, like all businesses, are required to obtain the necessary permits and licenses, and registration regulations vary by industry, state and locality.

Advantages

• Simple structure and low cost
• No separate tax, no double tax, no prepayment tax

Disadvantages

• Unlimited personal liability
• Limited lending capacity

 

U.S. Company Registration Process

Select company name

Check if the company name is registered and confirm that the company name is unique during the week. If you confirm that the name is available but do not intend to register it immediately, you can pay a fee to reserve the name.

Also, there are differences in company name suffix requirements for different company forms:

• LLC, the suffix must be “Limited Liability Company” or “LLC”;
• C Corporation, the suffix must be “Inc”, “Corporation”, “Incorporated” or “Corp”

The name of a U.S. company cannot contain the words “bank,” “banking,” “banker,” “trust. ” etc., unless permission is obtained to do so.

 

Select the state and address of your company

Each of the 50 U.S. states has its own business regulations and tax programs, and requirements and tax standards vary from region to region.

 

Select company type and registered agent

The type of corporate structure will affect the incorporation requirements, corporate ownership, payment of taxes, and debt liability. Common types of corporations are LLC and INC, with only S corporations requiring that all owners be U.S. citizens or U.S. green card holders.

The registered agent can be either the registered person or another agent in the local state, whose main duty is to receive corporate documents and tax letters.

 

Improve company information

Articles of Incorporation

Submit a charter to the state government, which varies from state to state. The charter must include:

1. Company name;
2. Company Address
3. Business Scope
4. Contact method of the registrant or registered agent

Statutory agent is a role that is required in most states when incorporating a company to receive correspondence and notices from the state on behalf of the company, usually including tax forms and notices of litigation, usually from a friend, or from a professional accounting firm or attorney.

 

Operating Agreement

The operating agreement mainly confirms the rights, obligations and profit distribution among the shareholders. It does not need to be submitted to the state government, but it is important to keep it for yourself. The corresponding English name is Operating Agreement or By Law, which specifies the rights and responsibilities of each member and provides detailed information on the internal management of the company, including how decisions are made, when meetings are held, and how new members are admitted.

Likewise, the JSC needs to draft this agreement to explain the rules and regulations that guide the operation of the company, which includes: the structure of the organization, the responsibilities of the members, information about the board of directors, the list of committees, detailed information about the meetings of shareholders and directors, etc.

In addition, the company is required to issue a Stock Certificate or Proof of Stake to the initial shareholders, with details of who has an ownership interest in the company.

 

Business license and permit

The industries that require a license include, but are not limited to:

• Catering-related;
• Retail-related;
• Plumbing-related;
• Construction-related;
• Drug-related;
• Auction-related;

For companies whose primary business is the sale of specific products, a seller’s license plus a sales tax license is sufficient; however, if the company’s business involves public transportation, investments, meat preparation, drug development, alcohol, tobacco, firearms, marijuana, etc., a business license or permit (such as a health permit) from the appropriate federal or state department is required, which may include:

• S. Securities and Exchange Commission (U.S. Securities and Exchange Commission)
• S. Food and Drug Administration (U.S. Food and Drug Administration)
• Federal Communications Commission (FCC)
• Federal Aviation Administration (FAA)

Not only that, some business activities with specialized skills require a license from the state department that regulates occupational and professional licensing, such as

• Doctors
• Lawyers
• Certified Public Accountants
• Architects
• Barber
• Electrical Repairer
• Electrician

 

Payment of fees

The cost of incorporation ranges from a few dozen to several hundred dollars, but there is no “initial capital”.

In addition, individual states have annual fees to pay for different forms of corporations, which are also usually under $1,000.

 

Apply for a corporate tax number (EIN)

EIN is Employer Identification Number (EIN) It is used to open bank accounts, pay various taxes, hire employees, etc.

The registrant’s U.S. social security number is usually required to register for an EIN number, or in the case of foreign nationals, a surrogate can be appointed to provide it.

 

The best states for foreigners to establish a company

The most tax-advantaged states in the U.S.

-South Dakota: South Dakota has no corporate or personal income taxes, making it a good choice for incorporating and operating a company.

-Florida: Florida’s relatively friendly tax policy and low tax rate is one of the most important factors in attracting companies to locate in the state.

-Delaware: Delaware is one of the most friendly states in the U.S., with not only favorable tax policies, but also relatively flexible corporate regulations and business environment.

The most popular states for incorporating companies in the United States

-Delaware: Delaware is one of the most popular states with better protection for shareholders and directors under its corporate statutes and friendly tax policies, favored by many large corporations. Companies incorporated in Delaware can enjoy a simplified incorporation process and a lower tax burden.

-Nevada: Nevada is also a very business friendly state with tax policies and corporate regulations that are very business friendly, especially for companies that need to protect their shareholders and directors.

-Wyoming (Wyoming): Wyoming has a very simple and friendly tax policy, as well as lenient corporate regulations that can provide more freedom for companies incorporated in the state.

-California: Although California has a strict tax policy, its strong technology industry and innovative atmosphere attracts many technology-based companies.

-Boston State (Massachusetts): Boston State is a dynamic and innovative state with excellent educational and research institutions that offer many opportunities for companies to grow.

These are the most popular states for incorporation in the U.S., but the specific choice of which state to incorporate a company needs to take into account factors such as the type of business, size and development direction of the company.

 

How to open a business account in a bank

Unless you are a sole proprietorship, it is important to keep your company and personal bank accounts separate so that you can divest yourself of legal and financial responsibilities. Also try to avoid “private use of public funds” in your regular expenses.

Banks usually need to see no more than the following 3 documents:

• Article of Organization Certified Copy
• Employer Identification Number (EIN)
• Company Disclosure Form Statement of Information (Certified Copy)

 

　Benefits of incorporating a U.S. company:

①Excellent business environment: The U.S. is one of the largest economies in the world, and its business environment is stable and transparent, with a well-developed legal system and protection of intellectual property rights, which is conducive to companies gaining competitive advantages in the market.

 

②Globalized business: The U.S. is a highly internationalized country, and companies registered in the U.S. can better expand their global markets through U.S. trade agreements, business networks and cultural diffusion.

 

③Benefit from U.S. tax policies: U.S. tax policies provide a variety of benefits to companies, such as depreciation expense, R&D tax credits, etc. In addition, the U.S. tax policy for companies varies from state to state, and registering in a state with friendly tax policy can provide more tax benefits.

 

④ Financing and Investment: The U.S. has the most active venture capital market in the world, and companies registered in the U.S. can attract investment from all over the world. Also, the U.S. financial markets offer a variety of financing options, providing additional sources of capital for company growth.

 

⑤ Increase company credibility: The U.S. has a high brand image and business reputation worldwide. Companies registered in the U.S. can gain more attention and recognition, increasing the company’s credibility in the global market.

 

In short, incorporating a U.S. company allows the company to gain more opportunities and advantages in the global market, attract more investment and financing, and benefit from favorable U.S. tax policies, as well as enhance the company’s business reputation and market competitiveness.